The regional impact of economic shocks: Why immigration is different from import competition

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Prior literature has documented large and persistent employment effects in regions exposed to import competition, but non-lasting effects in locations receiving large immigrant waves. Import competition and immigration are comparable to the extent that imports are thought of as the labor embedded in imported goods. We explain this puzzle by arguing that a fundamental difference between trade and immigration is that whereas immigrants systematically enter metropolitan areas with high housing prices, import competition affects all kinds of local labor markets. We argue that when housing expenditure is decreasing as a share of income, internal migration is more responsive to local shocks in high-price locations. We provide evidence that, irrespective of the local shock, internal migration is indeed more responsive in high than in low housing price locations. Hence, conflicting findings in the literature reflect differences between the average local labor markets receiving each shock, rather than systematic differences in how local labor markets absorb those different shocks.

Keywords: Trade shocks; immigration; internal migration; housing supply (search for similar items in EconPapers)
JEL-codes: F16 F22 J23 J61 R12 R31 (search for similar items in EconPapers)
Date: 2019-11, Revised 2020-12
New Economics Papers: this item is included in nep-geo, nep-int and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The Regional Impact of Economic Shocks: Why Immigration is Different from Import Competition (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1758

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